Buy some bitcoin, lose a finger

Among the many nonsensical claims made by bitcoin advocates is the claim that bitcoin is especially secure. Thanks to the magic of cryptography, they say, you don’t need to trust banks or governments to keep your money safe:[1]

Bitcoin is censorship resistant and confiscation resistant. If you take possession of your private Bitcoin keys, no one can access that wealth unless you give them permission.

I disagree. Bitcoin is confiscation-prone, not confiscation-resistant, thanks to a confiscatory technology that humanity has used for millennia: physical violence. The bad guys can confiscate your wealth by torturing you until you surrender your private keys.

Table 1 shows recent incidents where criminals used violence in an attempt to obtain bitcoin or other cryptocurrency. Just this month, the father of a crypto investor was abducted in Paris and had his finger severed.

Bitcoin advocates claim that bitcoin is better than real estate:[2]

The properties associated with bitcoin make it an ideal store of value: The supply is finite, it is easily portable, divisible, durable, fungible, censorship resistant and noncustodial. Bitcoin is rarer, more liquid, easier to move … It can be sent anywhere in the world at almost no cost and at the speed of light. On the other hand, real estate is … very difficult to liquidate …

The above passage describes the ideal properties of a ransom payment, not a store of value. You don’t want to own things that attract criminals, so I’d recommend against owning bitcoin, suitcases of unmarked bills, or bricks of cocaine. In contrast, residential real estate (“very difficult to liquidate”) is seldom used as a method of ransom payment.

The recent wave of violence might give impetus to the institutionalization of crypto. Since private keys are dangerous, some holders may switch to other instruments, such as exchange-traded funds. Unfortunately, getting rid of your private keys is not enough; what matters is whether criminals think you have them, not whether you actually have them.

Table 1: Violent cryptocurrency crimes

A case in Connecticut illustrates the dangers of owning bitcoin.[11] A teenager allegedly helped steal $240M of bitcoin, and subsequently bought a Lamborghini. In August 2024, his parents were driving it when they were abducted by six masked men. The criminals abandoned the Lamborghini, but kept the parents for ransom (the police later rescued the parents unharmed). So if you are looking to own something that criminals don’t want, I’d suggest a Lamborghini instead of bitcoin.

Coinbase tells its customers that “As long as you — and only you — have access to your private key, your funds are safe.”[12] It suggests an air-gapped wallet, for an “additional layer of security against potential hacks.”[13] Unfortunately, there’s one kind of hacking that air-gapped wallets cannot prevent, and that’s a thug who threatens to hack off your finger. This threat, also known as “rubber hose cryptanalysis,” is an inherent weakness of bitcoin.

As the price of bitcoin rises, the incentive to use violence to obtain bitcoin also rises. And that leads me to another downside of bitcoin: the possibility of a “majority attack” or “51% attack,” as mentioned in the original bitcoin whitepaper. With enough computing power, hostile actors can hijack the bitcoin payment system. Such an attack would not require violence, and might even be legal.

Budish (2025) argues that the incentive to launch a majority attack is the “Achilles heel of permissionless consensus.” According to Budish, bitcoin’s price must have a natural ceiling, because if the price gets high enough, a majority attack is certain to occur. Although violence is not required, physically attacking bitcoin miners to disable or seize their capacity might be helpful, as mentioned by Makarov and Schoar (2021).

Bitcoin cannot protect your wealth. You need a more powerful technology, a technology devised by history’s greatest thinkers, a technology that’s able to lift entire nations out of poverty and chaos. It is called “the rule of law.”

The rule of law is the only thing that enables wealth preservation, as discussed by Adam Smith in The Wealth of Nations:

It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government.

Of course, some countries do not have strong legal systems that protect property rights, and perhaps in those countries, it makes sense to own bitcoin. But in the countries listed in Table 1, what’s the benefit of bitcoin?

It’s just not true that bitcoin’s technology can transcend the pedestrian institutions of government. Sometimes you need the state to step in with police and courts. Unlike cryptography, the rule of law allows you to retain your wealth as well as all ten fingers.

Endnotes

[1] “Bitcoin: Solving The Elusive Monetary Problem,” Bitcoin Magazine, May 6, 2021.

[2] “Why Bitcoin Is The Ultimate Wealth Preservation Technology,” Bitcoin Magazine, November 22, 2022.

[3] “Bitcoin trader brutally tortured with drill in cryptocurrency robbery,” The Independent, March 5, 2019.

[4] “Man Convicted of Violent Home Invasion Robberies to Steal Cryptocurrency,” U.S. Department of Justice, June 25, 2024.

[5] “6 men accused of kidnapping family from Chicago townhouse and forcing a transfer of $15 million in cryptocurrency,” Chicago Tribune, February 11, 2025.

[6] “Historic bitcoin theft tied to Connecticut kidnapping, luxury cars, $500K bar bills,” CNBC, October 17, 2024.

[7] “High bitcoin price may have played role in Toronto crypto CEO's kidnapping: experts,” CBC, November 8, 2024

[8] “Father of crypto entrepreneur rescued from kidnappers after having finger severed,” CNN, May 4, 2025.

[9] “Father of crypto entrepreneur rescued from kidnappers after having finger severed,” CNN, May 4, 2025.

[10] “Father of crypto entrepreneur rescued from kidnappers after having finger severed,” CNN, May 4, 2025.

[11] “They Stole a Quarter-Billion in Crypto and Got Caught Within a Month,” The New York Times, April 24, 2025.

[12] “What is a private key?,” Coinbase. References to this and other companies should not be interpreted as recommendations to buy or sell specific securities. Acadian and/or the author of this post may hold positions in one or more securities associated with these companies.

[13] “What is an air-gapped wallet?,” Coinbase.

References

Budish, Eric. "Trust at scale: The economic limits of cryptocurrencies and blockchains." The Quarterly Journal of Economics 140, no. 1 (2025): 1-62.